Silence is Not Always Golden in Business
A common refrain to children is that “Silence is Golden.” As a lawyer I run into many situations where “silence” in a document (or lack of a document) is anything but golden.
The issues with “silence” or lack of documentation frequently come up in business situations. Problems arise when people do not address what will “never” happen. Unfortunately, “never” does happen sometimes.
There is a great business opportunity, and you jump in with your best friend, sibling, parent or just a smart business person. Things are going well, you all get along, so you don’t set up an agreement for your business. Then something changes.
Best friends do fight, spouses do separate, and people do pass away. Those emotional (and unexpected) times are not ideal for making the best decisions for moving a business forward. Often, it may not even be possible to make those decisions.
To ward against the pitfalls of silence, first you need to look at documenting these relationships with an operating agreement for your limited liability company, a lease for your building, equipment or farmland or other types of contracts.
In creating these agreements, it is important that you allow your attorney to play devil’s advocate and ask the tough questions. Even more importantly, you need to be prepared to answer those questions.
What if the business partners disagree? What if my heir passes away first? What if the business is extremely successful? How do we address expansion, contraction? Where do I want to be in 5 years?
The answers do not have to be complicated and the results do not have to be a long legal document. Simple answers in a simple agreement work most often – so long as the right questions are asked, the answers are reached, and you properly document them.
Once these questions are answered, don’t be afraid to revisit them. A little effort now can save a lot of heartache and expense down the road.